It is probable that in 1913, while financial panics were not
uncommon, high inflation was still largely seen by the founders
of the Fed as a relatively rare phenomenon associated with wars
and their immediate aftermath. Figure 1 plots the US price level
from 1775 (set equal to one) until 2012. In 1913 prices were only
about 20 percent higher than in 1775 and around 40 percent lower
than in 1813, during the War of 1812. Whatever the mandates of
the Federal Reserve, it is clear that the evolution of the price
level in the United States is dominated by the abandonment of the
gold standard in 1933 and the adoption of fiat money
subsequently. One hundred years after its
creation, consumer prices are about 30 times higher than what
they were in 1913. This pattern, in varying orders of magnitudes,
repeats itself across nearly all countries.